Attractions in Italy

Italy, a founder member of the EU, is a relatively young country which was only unified as a nation in 1861. It has land borders with Austria, France, San Marino, Slovenia, and Switzerland while the Vatican City is a separate state within Rome. The country's long coastline, stretching some 7,600km, has contributed to problems with immigration control. Besides deep rooted problems, such as the need to import most raw materials, the country is also plagued by corruption and crime.

The economy is divided by the industrial north and less developed and poorer agricultural south. The latest OECD report assessment of the country reported that exports and investment activity rose markedly in the first half of 2004, ending a protracted slump. GDP growth of between 1.5 per cent and to 2 per cent was forecast for 2005-06 although 'inflation could start to rise again'. As in much of Europe, property prices have been rising. According to the Royal Institution of Chartered Surveyor's European Housing Review 2005, the housing market has been on 'a sustained upward swing for five years' (following a seven year period of recession in which prices fell by over 20 per cent). Last year 'agents were reporting that market activity was still brisk - although it had fallen below its peak'.

Most Italian property is sold as freehold although Italian property law recognises various other property rights and tenures. Usufruct is a right to use the property of another for a fixed period but not to change its nature. Leasehold rights, which may be for a fixed period of 20 years or more or in perpetuity, allow the lessor to use the property as if he or she were the owner, subject to a requirement to improve the land and pay a rent. Building rights entitle the holder to construct a building on land belonging to a third party, or maintain a building standing on land belonging to a third party.

Building rights may be for a limited or unlimited period of time, but if for a fixed period, ownership of the building reverts to the owner of the land on their expiry. Italian property transfer processes have some similarities to France. Based on land registration, the state regulated process involves both purchaser and seller using the same state appointed notary to complete the transaction. The process begins with a formal and nominally binding offer to purchase arranged through an estate agent. If accepted during the set period of the offer, this is followed by a preliminary contract signed by both parties (at which point a deposit will be paid). Finally comes formal completion.

The notary, in front of whom the completion documents must be signed, will verify that the documentation is correct, that the property is free from registered encumbrances and checks the identities of the parties involved. Searches beyond what is included in the registry are unlikely to be exhaustive. The notary also collects the taxes and duties involved. These vary between Non-resident property purchasers are treated differently to resident purchasers in a number of ways. In particular they will be obliged to pay higher registration fees, although residence can be claimed within a fixed time subsequent to the purchase.

Total fees and charges are likely to amount to between 5 per cent and 20 per cent, including estate agents fee, if applicable, registration fees or VAT if a new property, and the notary's fee. Fees in the order of 8 to 10 per cent are also payable on sale of a property. Some charges are based on the registered value of the property, which is likely to be less that the actual purchase price. This also applies to local property taxes, the amount of which varies from region to region. The Imposta Comunale surgli Immobili is paid by both resident and non resident owners - although the amount is halved for property that is not habitable. In addition there are likely to be charges for local services.

Italian taxation is undergoing reform. From the start of 2005 personal tax rates have been set on a graduating scale ranging from 23 per cent to 39 per cent, with a 4 per cent supplement for income in excess of 100,000 euro. Property owners are obliged to file annual tax returns but are only taxable on income arising in Italy. However, there tax is levied on the notional rental value of the property (based on its registered value) whether or not it is rented out. Both residents and non-resident property owners are subject to Italian inheritance law and tax. But the good news is that currently there is no capital gains tax to pay on property gains.